The Dividend Cafe

Today's Post - https://bahnsen.co/4563eH1 As balanced as Jay Powell’s comments were yesterday in the presser following the latest and potentially last 25 bps rate hike of 2023, markets opened in rally mode taking comfort in his ‘data dependency’ rate path commitment over what could have been otherwise hawkish comments. We then got an entire slew of strong economic data around 830AM EST with durable goods orders, jobless claims, home sales, and most notably Q2 GDP coming in ahead of expectations that brought back the ole ‘good news is bad’ jitters into markets and we reversed course. Bonds sold off across the curve, but more longer than short and the yield curve steepened to -92 bps in 2/10’s. So, while stocks did put an end to a 13 day consecutive advance and the 10 YR is now flirting again with 4%, what we really saw was more support for the soft landing narrative and candidly, if this is what a recession looks like, I’ll take it. All discussed in more depth in the video podcast below, as well as a twofer in Ask David today as an added bonus. Enjoy and reach out with questions. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3rRaJTS The Dow was up for the 12th market day in a row, the longest streak since February of 2017 … (the ancient history of 6.5 years ago, back when I was much younger). Hong Kong and China stocks rallied hard (+4%) as Chinese leadership pledged more “support” for their property sector. What could go wrong? Some “worry” China will “succeed” in fighting their disinflation this way, and that it will leave a global economy too hot and make things harder for central banks. Some people, though, are idiots. WTI Crude oil broke through its 200-day moving average and is now a whisker from $80. I will be paying more attention to the threat of labor union strikes in the coming days and weeks. One strike here and one strike there (particularly in something as niche as Hollywood writers) doesn’t grab me from a purely macroeconomic sense. But four new strikes and a couple big ones (like, you know, the UAW), and I do wonder what kind of impact it may have on select companies and sectors. Off we go … Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3O7FRWJ I am back in New York City after a few days working from my house in East Hampton and ready for a hot and humid week in the concrete jungle. Office needs and speaking engagements didn’t allow me too much time at our Hamptons home this summer but I do enjoy being here in the city even in my least favorite time of the year weather-wise (I will take the snow storm winters over the oppressive heat any day!). To see New York this crowded and normal after what I observed in the depths of COVID is a true blessing (I was here throughout summer of 2020 when it was a real ghost town). It will be a busy and lively week in our Manhattan office and I am excited. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3NZaBt7 Bring up the issue of “off-shoring” American manufacturing and you will get a wide variety of responses, many of them highly emotional. Today’s vernacular talks about “onshoring” or “re-shoring” or “near-shoring” – various synonyms or adjacent concepts to the idea of reversing certain trends of globalization, primarily the ones dealing with American activities in manufacturing and the supply chain. As is the case with almost every topic I could ever address these days, the subject is complex, requires nuance, and doesn’t come close to one of the two simplistic boxes we are supposed to fit all of our thinking and analysis into. My interest in this Dividend Cafe is less political and more economic. It is less about making a statement and more about doing some analysis. It is less about finding a campaign message and more about finding an investment thesis. So to those ends, we work. Let’s talk about expectations for America’s supply chain management in the years ahead. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/44yThlA It’s hard for contrarians to like some of the sentiment out there, with “bulls” at their highest level since April of 2021 and bears at their lowest level since June of 2021. The greed/fear index is tilted way towards the “greed” side of things and while it feels good to some, we like it the other way. Earnings season has started off well across the market, broadly speaking, but Tesla and Netflix were the first two mega-cap “name brand” companies to buck that trend this season, getting hit hard today (though still way, way up on the year). Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/4796XFZ David Bahnsen is traveling today and I, Trevor Cummings, will be filling in to provide you with the daily happenings around markets on this beautiful summer day. The market hit a 52-week high, the Dow is on its longest win streak (8 consecutive days) since September 2019, headlines were captivated by a slew of corporate earnings reports, we have new housing starts data, and of course the best part – Ask David. Please join us for all of this and much more. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3DhRwgD After crickets last night in futures, we opened up nicely on the day right out of the gate and continued to trade higher in both stocks and bonds throughout the entire session closing just off the highs. For all those waiting for the data or news indicating some recession shoe to drop we just aren’t seeing it and flows are quietly but steadily moving more towards risk assets with short positions covering. Its still early innings in earnings season with only about 9% of companies reporting so far, but with the majority of the largest banks out and beating expectations, a common theme: resiliency in the US consumer offsetting the negative affect of yield curve inversion on net interest margins. Also of note, high yield bond spreads are at the lowest level in over a year at 380 wide, a full 100bps lower than they were at the start of the last recession in comparison. So there you have it, markets remain resilient, and are now up 27% from the October lows, and we continue to climb this wall of worry in another heavily doubted equity bull market. Check out the podcast video today for more color on my resiliency theme and more. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3Q15Bql Economic Front One of the economists I read every day who has been screaming non-stop for 18 months now that we are entering a recession sent a “reminder” email this morning that we are “still likely” to enter a recession. And maybe we are. First of all, broken clocks and all that stuff. But secondly, I think the question about if and when we enter a recession now misses the point. Short term, these people obviously don’t know. Additionally, no one knows what it would mean to markets if we did. No one. But longer term, we don’t need to know if there is a Q4 2023 or a Q1 2024 recession to know that we do face significant excessive indebtedness that matters for the next 10, 20, 30 years. I remain mystified by why these chicken littles can’t focus on a long term reality we do know versus a short term reality we do not. Consumer confidence jumped to 72.6 from 64.4 last month in the latest University of Michigan Consumer Confidence survey. This is the highest since September of 2021. Current conditions and expectations were both higher. Two quick caveats: (a) I have always found consumer confidence to be worthless; (2) Pre-COVID it was at 101, so putting the index in perspective, it is ahead of expectations, ahead of recent prints, and yet well below prior level. China’s Q2 GDP growth missed expectations, coming in at +6.3% year-over-year but slowing to just 0.8% from Q1’s growth rate (which had been +2.2%(, which was a surprise. Retail sales are not huge, capex is muted (as their property sector stumbles), and youth unemployment is over 21%. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3JYQSbA I am writing this week’s Dividend Cafe from Reagan International Airport in Washington DC. I recorded the video and podcast from my hotel room last night. I am soon departing for Memphis, TN where I am speaking at a conference Friday and Saturday before returning to New York. I was in DC to speak to a very large group of college students at George Mason University on free market economics. I had taken the train in to DC yesterday from New York after my flight to DC on Wednesday got cancelled just minutes after speaking to a symposium in south Orange County on the ESG investing movement (you can guess what perspective I brought to the subject). I made it to that conference after having a flight from New York Monday sit on the tarmac for four hours waiting for fuel. So from New York to California back to New York to Washington DC to Memphis then back to New York again, all in six days. It’s been a week. In the meantime, I scrapped plans for a Dividend Cafe on plans for the American supply chain and what those changes may mean for the American economy, and instead have elected to do a refresher on dividend growth. I plan to do a “dividend growth” focused Dividend Cafe once a quarter, and this seemed like a pretty good day to do it. Not to brag or anything, but I can write a Dividend Cafe about dividend growth quite intuitively (which I guess bragging about that would be like bragging about one’s speech and debate achievements in high school to the football team, which I will just anecdotally mention is not as cool a thing to do as it may sound). Dividend growth is, after all, the very end to which we work. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3Ddn2fV Earnings season is officially underway (companies like Delta and Pepsi released today, and a slew of big banks release tomorrow). The annual inflation rate came in yesterday at the lowest level in more than two years. The dollar is at its lowest level (against a global basket of different currencies since April of last year. Senator Warren is officially now yelling for Chairman Powell and the Fed to stop hiking interest rates (I have been waiting for a populist backlash; I just didn’t know if it would be from the right or the left first; now we know). China exports fell -12.4% last month (year-over-year), with 11 months in a row of declining exports to the U.S. Hmmmmm … Jobless claims came in at 237,000, heading south from the averages north of 250k we had been seeing! Producer Prices are up +0.1% year-over-year. +0.1%. Zero percent inflation in wholesale prices. Now, let’s be real honest about something here. This is mostly a story of what we call “trading base effects.” Last year at this time, the YOY PPI was +11%, so that number was so silly that a year later, being up +0% is less profound than it may seem. But of course, the same was true before (only on the other side of the math), where a high YOY number was a by-product of the prior year’s price collapse. And we are supposed to do calculations off of these distortions? But there is genuine price deflation in the producer prices (year-over-year) of processed and unprocessed core goods. Commodity prices are down. Supply chains have normalized. Wholesale prices have moderated entirely and are very likely heading lower based on manufacturing data. TIP spreads are showing implied inflation expectations of 1.95% for the next two years. Over five years, 2.19%. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com